System and methods for residential real estate risk transference via asset-backed contract

ABSTRACT

Real estate risk may be transferred via a contract associated with a real estate property. Such a contract may be an asset-backed index swap or an investment contract in which an owner entity of the real estate property grants to an investor entity an economic right to a portion of future appreciation of the real estate property in exchange for consideration. The contract may expire responsive to a transfer of title of the real estate property. Exemplary implementations may provide a way to slice off the growth component of the property to an investor who wants it yet leaves the utility value and existing equity squarely in the hands of the homeowner. This division of growth and utility components may allow the homeowner to sell just the growth component of the property—and do so at a lower price in exchange for the convenience and liquidity tendered.

CROSS REFERENCE TO RELATED APPLICATIONS

This application claims the priority benefit of U.S. Provisional PatentApplication No. 61/707,317 filed on Sep. 28, 2012 and entitled“Residential Real Estate Risk Transference System Via Asset-Backed IndexSwap and/or Investment Contract,” the entire disclosure of which beingincorporated herein by reference.

FIELD OF THE DISCLOSURE

This disclosure relates to systems and methods for residential realestate risk transference via asset-backed index swap and/or investmentcontract.

BACKGROUND

Owners of residential real estate may have limited options concerning 1)the management, mitigation, and transference of price risk associatedwith ownership and, as a corollary to this limitation; 2) theutilization of their property to create capital under traditionalfinancing arrangements. By the same token, investors may lack anefficient way to access this asset class and associated risk/return andthereby participate in single-family detached residential real estate.Outside of thinly traded futures contracts on residential real estateindices or the outright purchase of physical properties (single familydetached homes), avenues into residential real estate as an asset classis nearly non-existent. In short, there is no developed derivativesproduct or market that bridges the needs of homeowners (e.g., risktransference specific to their ownership experience that is nottantamount to debt or equity sale) and the needs of investors (e.g.,collateralized interests in property delivered in an efficient,transparent and scalable way).

Residential real estate has accounted for a larger pool of assets thanthe S&P® 500 for most of the past five decades. While stock or bondoptions and hedging instruments are widely available as a way to manage,mitigate or access risks of these traditional assets, there are almostno similarly available derivative instruments for actual homeowners(individual or institutional). As residential property is one of themost widely held assets and often makes up the largest portion of anindividual's or family's total wealth, homeowners may be unfortunatelycompelled to gamble with a significant portion of their net worth: amost unwelcome condition of homeownership. For instance, while an ownerof an individual stock issue might sell a call option (essentiallyselling appreciation rights for cash) and simultaneously use theproceeds to purchase a put option (locking in their value andeliminating the risk of negative price performance) so that they mightenjoy the stock dividends without price risk, no such vehicle exists forhomeowners. Homeowners are in desperate need of ways to “kick thegambling habit”, and enjoy the dividends of homeownership (the abilityto live in the property or alternatively collect rents) without theconcordant requirement to constantly speculate on future home prices.The ability to eliminate or otherwise manage risks may have saved manyhomeowners from the dire position they find themselves in after thecollapse of the housing bubble in 2008.

At the same time, property owners often seek ways to monetize orotherwise create liquidity from the ownership of their home, perhaps inorder to pay off existing debt, assist with daily expenses, or purchaseinvestments or insurance (e.g., life insurance, long-term careinsurance, home price insurance as mentioned above, and/or otherinsurance). In short, they may wish to transfer value otherwise tied upin the home to some other portion of their total wealth orinvestment/risk portfolio. They are left with only two choices: 1) sellthe house, in which case they no longer enjoy the benefit of living inthe property; or 2) incur certain debt and pledge their property assecurity for a loan.

Selling is not an option as the homeowner is seeking a way to createliquidity/monetize but retain ownership (i.e., avoid relocation and inthe case of senior homeowners continue to age in place). Banks andfinance companies offer products such as mortgages, direct and indirectsecured loans, reverse mortgages, or revolving lines of credit asmethods of using property to extend or secure credit. These are debtproducts and in some cases may not be available to homeowners or may beavailable in a limited fashion. Older age homeowners may not havesufficient current income to qualify for a traditional mortgage, and areverse mortgage may not be sufficient based on underwriting constraints(e.g., larger house values, existing liens, location, age limits, and/orother constraints) or unavailable to younger homeowners. Broad economicand market conditions may also create obstacles to liquidity; debt-basedalternatives for homeowners were severely limited during the liquiditycrisis of 2008 and subsequent years and the reverse mortgage market hasall but evaporated as Bank of America, Wells Fargo and Met Life have allexited the space in the last two years.

Finally, in as much as selling the property is not a welcome solution(as retention of ownership is often the very point); debt-basedalternatives can be equally distasteful even when they are available.Homeowners who spent decades paying down a mortgage may not want to gosliding back into debt and the very thought of a large, lurking balanceto be paid off may not be acceptable to some. Others may have a largebequest motive whereby they wish to pass on a significant property stakeunencumbered by debt to the next generation. All of the existing loanproducts offered by banks and finance companies involve an element ofcertain and permanent debt incurred by the property owner until the loanis repaid. Very few existing loan products account for, or permit theuse of, future appreciation of the value of the property in connectionwith the extension of credit. Loan products that do involveappreciation, usually tie the appreciation to the loan itself, typicallyin the form of a marginally reduced interest rate. These types of loansare called shared appreciation mortgages (“SAMs”) and function in manyrespects similar to a traditional mortgage. Funds provided under a SAMmake up the principal balance, which accrues interest at the reducedrate. At the time the property is sold, in addition to the repayment ofthe outstanding balance owed, the appreciation realized in the propertyis shared in accordance with the terms of the loan. Variants of SAMsexist, whereby the entire rate of return on the principal balance isdriven by the appreciation of the property, but again the litmus testfor being considered a loan—the absolute right of repayment-clearlymarks these as debt instruments, not an outright sale of potential andfuture appreciation.

U.S. residential real estate, specifically single-family detached homes,is a $19 trillion dollar market relative to the $15 trillion U.S. equitymarket that offers investors a unique and attractive performanceprofile, characterized by moderate, stable returns and low correlationto most other investable asset classes. That said, the asset class hasalmost zero institutional exposure due a number of issues with existingmethods of both actual and synthetic investment. Actual, physicalownership comes with significant holding and management costs, acumbersome settlement and clearing process (i.e., houses are not tradedon exchanges), lack of efficient and frequent price transparency (i.e.,homes need to be appraised for valuation) and generally very lowliquidity relative to traditional asset classes such as stocks andbonds. Diversified, direct investment via physical ownership inresidential real estate is hard to achieve.

Synthetic or indirect exposure can be achieved through futures contractswhich are linked to S&P® Case-Shiller Indices® and traded on the ChicagoMercantile Exchange (CME), though these products are very thinly traded.The illiquidity created by a lack of natural buyers and sellers createsvery wide spreads between “bid” and “offer” prices. Because ofresidential real estate's low volatility and clear, long-termcyclicality, speculators or investors (without hedging needs) tend toall have the same view at the same time. Homeowners (natural sellers)cannot use these contracts to hedge and transfer risk of changes in homeprices as the limited term of the contracts (2 years) and wide spreadscreate insurmountable risk management costs. Perhaps most importantly,the contracts offered by the CME are futures contracts (regulated by theCFTC and the Commodity Exchange Act) with standardized asset, quantity,quality and investment terms. Put differently, they are not specific toboth the property considered and the homeowner's needs (e.g., quantityor face amount and the term of the contract) and thus are not viable forefficient risk transfer. Given this absence of a large population ofready and willing homeowners as natural sellers of interests in realproperty via the available futures contracts, potential investors andspeculators (natural buyers) have similarly not adopted this as a meansof investment in residential real estate. Further, the straightforward,unstructured (i.e., there are no protections in the event home pricestake time to perform in their historically stable, positive fashion)contract does not appropriately reward the investor for the illiquidityrisks and market friction inherent in the CME futures. Finally, thefutures contracts are not interests in real property and lack thesecurity of being on title to a tangible, real asset. In an era ofliquidity crises and bank defaults, some investors demand a “goldstandard” of collateral behind their investments as opposed to thecredit risks of large banks or other investors as counterparties.

The only other means of investing in residential real estate in anefficient and diversified fashion would be via a REIT structure orsimilar pooled investment vehicle. This is little different than theinvestor actually owning physical property outright, as it simply poolsinvestors and ultimately passes on the same hurdles, costs (maintenance,property tax, property management, acquisition and disposition) andrisks (vacancy and tenant risks, refinance risks for mortgage-financedtransactions). Similar to direct ownership, valuation is cumbersome atbest and opaque at worst as it requires actual appraisal of the realestate asset; this opacity has plagued the non-traded REIT space foryears as REIT sponsors would arbitrarily set share price despite obviouschanges in real estate markets. Just as in direct ownership of physicalreal estate, the REIT investor ultimately bears the concordant risks ofmaintenance, operation, tax, vacancy, etc. As such, the investor (viathe REIT) must not only pay for the utility value of the property (theability to live there), they must then also operate the property inorder to recapture that value via rental streams.

The futures contracts may be an ill-fit proxy for non-customized risktransfer and wagering; shared appreciation mortgages are loaninstruments that may merely capture additional value from the investorwith little benefit to homeowners. Existing avenues (e.g., syntheticinvestment via futures contracts or actual ownership via physicalpurchase or REITs) may create a host of potential taxation issues fordomestic and offshore investors alike. REITs and physical ownershipincur property taxes (and for non-U.S. entities FIRPTA), while thefutures contracts incur income or capital gains tax, all of whichsubtract from net investment returns.

SUMMARY

One aspect of the disclosure relates to a system configured for realestate risk transference via a contract associated with a first realestate property. Such a contract may be an asset-backed index swap or aninvestment contract in which an owner entity of the first real estateproperty grants to an investor entity an economic right to a portion offuture appreciation of the first real estate property in exchange forconsideration. The contract may expire responsive to a transfer of titleof the first real estate property. Exemplary implementations may providea way to slice off the growth component of the property to an investorwho wants it yet leaves the utility value and existing equity squarelyin the hands of the homeowner. This division of growth and utilitycomponents may allow the homeowner to sell just the growth component ofthe property—and do so at a lower price in exchange for the convenienceand liquidity tendered.

Exemplary implementations may provide a cost effective risk transferencetool that allows homeowners (natural sellers) to sell their futureappreciation and tailor the term of this risk transfer to theirindividual homeownership experience (e.g., the contract ends preciselywhen the homeowner sells the property or passes away). Tailoring to theindividual's actual property ownership experience may allow for a moreefficient transfer (or “perfect fit” whereby the homeowner need notabsorb the cost of customization or be made whole for the inability tocustomize) and therefore more willing participants—and ultimately betterprices offered to those absorbing the risk. At the same time, this toolmay appropriately reward the investor (natural buyer) for theilliquidity risk they now bear, and thus may create viable accessdirectly to the homeowner and the very large but otherwise inaccessiblepool of assets they represent.

For the investor, the tool may create an efficient means of investing inU.S. residential real estate that offers the benefits of easymark-to-market like futures (i.e., not reliant on physical appraisal forvaluation estimates); specifically it may be tied to an index or otherperiodic and public valuation metric and remove idiosyncratic, propertyspecific risks and simultaneously create instant diversification. At thesame time, it may offer the benefits of actual investment in realproperty: it may directly reach all the way to a homeowner as opposed toother speculators or investors (i.e., a motivated counterparty seekingliquidity/risk hedging as opposed to simply the other side of aninvestment view), the collateral and security benefits of being on titleof actual real estate assets, and the avoidance of otherwise costlytaxation issues created by both existing avenues of physical (propertytax or FIRPTA) and synthetic ownership (income or capital gains tax).

Exemplary implementations may provide an alternative investment orswap-type structure such that property owners may mitigate theirexposure to home price changes as well as sell the future appreciationof property in exchange for capital advances and do so without therequirement of selling or incurring certain debt. This type of swap orrisk transference structure may not only allow for the management ofrisks and creation of liquidity by the homeowner, but may simultaneouslyallow for the transference of those risks to investors wishing to accessan attractive asset class that is otherwise costly, cumbersome and allbut inaccessible.

In some implementations, the system may include one or more servers. Theserver(s) may be configured to communicate with one or more clientcomputing platforms according to a client/server architecture. The usersmay access the system via the client computing platform(s). Theserver(s) may be configured to execute one or more computer programmodules. The computer program modules may include one or more of acurrent-cash-settlement-valuation module, aperiodic-cash-settlement-value-projection module, aprojected-home-price-index-construction module, anearly-termination-value-determination module, aconditional-prepayment-rate-vector-determination module, aprojected-cash-flow-contract-valuation module, astochastic-partial-differential-equation-contract-valuation orstochastic-PDE-contract-valuation module, and/or other modules.

The modules are described, at least in part, in the context of acontract (e.g., an asset-backed index swap or an investment contract) inwhich an owner entity of the first real estate property grants to aninvestor entity an economic right to a portion of future appreciation ofthe first real estate property in exchange for consideration. Such acontract may expire responsive to a transfer of title of the first realestate property. The owner entity may include one or more individualsand/or one or more corporate entities (or other legal entities) that,together, own the first real estate property. The investor entity mayinclude one or more individuals and/or one or more corporate entities(or other legal entities) that, together, seek to enter (or haveentered) the contract with the owner entity.

The current-cash-settlement-valuation module may be configured todetermine a current cash settlement value of the contract. The cashsettlement value may be an amount due to the investor entity responsiveto the contract being expired. The real estate property may be aresidential real estate property, a commercial real estate property, abuildable lot, and/or other real estate property, according to variousimplementations. A buildable lot may be a “dirt lot” that has noresidential or commercial building on it, but that can be built on inthe future. The cash settlement value may be equal to the greater of ashared index appreciation and an early termination value. The sharedindex appreciation may be a contractual appreciation share multiplied bya change in a designated index multiplied by an initial value of thefirst real estate property. The appreciation share may be an amount offuture appreciation conveyed by the contract. The designated index maybe an index that measures prices residential housing. The initial valuemay be the value of the first real estate property when the contract isinitially placed into force. The early termination value may bedetermined based on an early termination provision. The earlytermination provision may designate either a set schedule or anaccretion model with a base amount plus an annual rate of return for aduration of an early termination period. The base amount may be a totalcontract cost to an investor associated with the contract. Under the setschedule, the early termination value may be determined from a table viaa look-up based on an age of the contract.

The periodic-cash-settlement-value-projection module may be configuredto determine future cash settlement values per period based on one ormore of a term of the contract, an appreciation projection associatedwith the first real estate property, or a conditional prepayment ratevector. The cash settlement value for each projected period may be thegreater of a shared index appreciation and an early termination value.The period of determined future cash settlement values may be daily,monthly, yearly, and/or other periodicity, according to variousimplementations.

The projected-home-price-index-construction module may be configured todetermine a projected home price index associated with the first realestate property based on one or more home price appreciation vectors.The projected home price index may describe appreciation of the firstreal estate property between a projection date and a contracttermination date. A given home price appreciation vector may represent aforecast scenario of an outcome of appreciation of the first real estateproperty. A starting point of the projected home price index may beequal to a current designated index value divided by a contact startingindex multiplied by one hundred. The outcome resulting in an earlytermination of the contract may be an expected outcome, a stressedoutcome, a situational outcome, and/or other outcome. The given homeprice appreciation vector may account for one or more of historicalindex performance, macro-economic factors, or local market demographics.The given home price appreciation vector may include one or more of alinear function, a parabolic function, a polynomial function, asinusoidal function, or a stochastic function.

The early-termination-value-determination module may be configured todetermine an early termination value of the contract. The earlytermination value may be an amount due to the investor entity in theevent that the contract is terminated during an early termination periodset forth in the contract. The early termination value may be thegreater of a participation share of appreciation or an early terminationamount set forth in the contract. The early termination value may bezero in the event that the contract is terminated after the earlytermination period set forth in the contract.

The conditional-prepayment-rate-vector-determination module may beconfigured to determine conditional prepayment rate vectors associatedwith the contract. A given conditional prepayment rate vector mayrepresent a prepayment scenario based on a statistical likelihood thecontract will terminate within a given period. The given conditionalprepayment rate vector may be determined based on one or more ofdemographic information associated with the owner entity, home priceindex performance, a proximity to contract origination, an earlytermination provision, or model stressing. The given conditionalprepayment rate vector may be dynamic and change over time.

The projected-cash-flow-contract-valuation module may be configured todetermine a value of the contract based on cash flow associated with thecontract by summing discounted projected cash flows for future periods.A given projected cash flow for a given period being the greater of theshared home price appreciation and the early termination value,multiplied by the conditional prepayment rate, where the shared homeprice appreciation equals period home price index divided by thestarting home price index multiplied by the initial home value. Thegiven projected cash flow for the given period may be discounted by atarget return to arrive at a present value.

The stochastic-PDE-contract-valuation module may be configured todetermine a probability of expiry per period. A given probability ofexpiry for a corresponding period may be based on a probability of atransfer of title of the first real estate property during thecorresponding period. Transfer of title may be effected by either a saleby the owner entity of the first real estate property or death of theowner entity. The stochastic-PDE-contract-valuation module may beconfigured to determine a present value of the contract using aprobabilistic model based on the future cash settlement values forperiodic expires, and the probabilities of expiry for correspondingperiods. The stochastic PDE model may be a modified Black-Scholes model.The modified Black-Scholes model may be a Black-Scholes model that ismodified by (1) synthetically replicating the contract with commonplacecontracts puts and calls, (2) solving for a value of the commonplacecontracts puts and calls across all possible monthly expires, and (3)multiplying the value of the commonplace contracts puts and calls by theconditional prepayment rate or a probability of expiry in individualperiods

These and other features, and characteristics of the present technology,as well as the methods of operation and functions of the relatedelements of structure and the combination of parts and economies ofmanufacture, will become more apparent upon consideration of thefollowing description and the appended claims with reference to theaccompanying drawings, all of which form a part of this specification,wherein like reference numerals designate corresponding parts in thevarious figures. It is to be expressly understood, however, that thedrawings are for the purpose of illustration and description only andare not intended as a definition of the limits of the disclosure. Asused in the specification and in the claims, the singular form of “a”,“an”, and “the” include plural referents unless the context clearlydictates otherwise.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 illustrates a system configured for real estate risk transferencevia a contract by which conveys an economic right to a portion of futureappreciation of real estate property, in accordance with one or moreimplementations.

FIG. 2A illustrates an exemplary valuation procedure, in accordance withone or more implementations.

FIG. 2B illustrates an exemplary origination procedure with thevaluation procedure of FIG. 2A, in accordance with one or moreimplementations.

FIG. 2C illustrates an exemplary management and/or monitoring procedurewith the valuation procedure of FIG. 2A, in accordance with one or moreimplementations.

FIG. 2D illustrates an exemplary distribution procedure with thevaluation procedure of FIG. 2A, in accordance with one or moreimplementations.

FIG. 3 provides exemplary home price appreciation vectors, in accordancewith one or more implementations.

FIG. 4 provides an exemplary Standard and Poor's Case-Shiller Index, inaccordance with one or more implementations.

FIG. 5 provides exemplary baseline prepayment rates, in accordance withone or more implementations.

FIG. 6 provides exemplary conditional prepayment rate vectors, inaccordance with one or more implementations.

FIG. 7A provides an exemplary expected scenario for origination withhome price appreciation being linear and based on historical home priceappreciation rate, in accordance with one or more implementations.

FIG. 7B provides an exemplary expected scenario for origination withhome price appreciation being cyclical, starting from a down market andbased on historical home price appreciation rate, in accordance with oneor more implementations.

FIG. 7C provides an exemplary stressed scenario for origination withhome price appreciation being linear and based on a stressed (reduced)home price appreciation rate, in accordance with one or moreimplementations.

FIG. 7D provides an exemplary stressed scenario for origination withhome price appreciation being cyclical, starting from a down market andbased on stressed (reduced) home price appreciation rate, in accordancewith one or more implementations.

FIG. 7E provides an exemplary stressed scenario for origination withhome price appreciation being linear and based on historical home priceappreciation rate, and conditional prepayment rate having noterminations during early termination provision term, in accordance withone or more implementations.

FIG. 7F provides an exemplary stressed scenario for origination withhome price appreciation being cyclical, starting from a down market andbased on historical home price appreciation rate, and conditionalprepayment rate having no terminations during early terminationprovision term, in accordance with one or more implementations.

FIG. 7G provides an exemplary severe stressed scenario for originationwith home price appreciation being AAA stressed, in accordance with oneor more implementations.

FIG. 7H provides an exemplary severe stressed scenario for originationwith home price appreciation being AAA stressed, and conditionalprepayment rate having no terminations during the early terminationprovision term, in accordance with one or more implementations.

FIG. 7I conveys flex pricing for origination with a contract premium ofsixteen percent, in accordance with one or more implementations.

FIG. 7J conveys flex pricing for origination with a contract premium offourteen percent, in accordance with one or more implementations.

FIG. 7K conveys flex pricing for origination with a contract premium ofsixteen percent with home price appreciation being cyclical, startingfrom a peaking market and based on historical home price appreciationrate, in accordance with one or more implementations.

FIG. 7L conveys flex pricing for origination with a contract premium ofsixteen percent with home price appreciation being cyclical, startingfrom a peaking market and based on historical home price appreciationrate, and the early termination provision is extended to twelve years attwelve percent, in accordance with one or more implementations.

FIG. 7M conveys flex pricing for origination with a contract premium ofsixteen percent with home price appreciation being cyclical, startingfrom a peaking market and based on historical home price appreciationrate, and the early termination provision is consistent at ten years attwelve percent, in accordance with one or more implementations.

FIG. 7N provides an exemplary management scenario in which a contract isaged five years, in accordance with one or more implementations.

FIG. 7O provides an exemplary management scenario in which a contract isaged five years, and there is a projected contract value risk, inaccordance with one or more implementations.

FIG. 7P provides an exemplary scenario for distribution beingcontributed value, in accordance with one or more implementations.

FIG. 7Q provides an exemplary scenario in which application is declined,in accordance with one or more implementations.

FIG. 7R provides an exemplary scenario for distribution being MonteCarlo, in accordance with one or more implementations.

FIG. 7S provides an exemplary scenario for the application of modifiedBlack-Scholes and Greeks on an aged contract, in accordance with one ormore implementations.

FIG. 8A illustrates an exemplary period data procedure and an exemplarytime series data procedure, in accordance with one or moreimplementations.

FIG. 8B illustrates an exemplary modified Black-Scholes value and Greeksprocedure and an exemplary portfolio aggregation and value process, inaccordance with one or more implementations.

FIG. 9 illustrates a method for real estate risk transference via acontract by which conveys an economic right to a portion of futureappreciation of real estate property, in accordance with one or moreimplementations.

DETAILED DESCRIPTION

FIG. 1 illustrates a system 100 configured for real estate risktransference via a contract by which conveys an economic right to aportion of future appreciation of real estate property, in accordancewith one or more implementations. Exemplary implementations may provide,among other things, a swap and/or investment system and method wherebysuch that an owner or owners of property grant(s) to the swap investorthe economic right to some portion of the future appreciation (anyappreciation that occurs over the life of the swap or investmentcontract) in exchange for a fee or other consideration. The fee or otherconsideration may be paid in one lump sum, monthly payments, or asotherwise agreed upon between the parties.

The swap and/or investment contract (interchangeably referred to hereinas “swap” or “contract”) may be secured via a lien on title of theproperty and terminates after a fixed term or upon the transfer of titleof the property (due to death of homeowner or sale). The appreciationultimately transferred from the homeowner to the investor may bemeasured by as opposed to the specific appreciation of the individualproperty. Examples of such a measuring index may include one or more ofthe S&P®/Case-Shiller Index®, CoreLogic Case-Shiller Index, CoreLogicHome Price Index (HPI), OFHEO HPI, and/or other measuring indexes. Upontermination, the swap is cash settled whereby the lien may beextinguished and the homeowners (or their heirs) may pay the investorthe cash equivalent of appreciation due. The swap and/or investmentsystem and method is not a debt transaction, in accordance with someimplementations. There may be no absolute right of repayment in any andall scenarios. If appreciation (as measured by the relevant index) isflat or negative for an extended period, the swap contract may expireand the investor may incur a total loss of investment. A swap fee orother investment consideration may be paid to the property owner. Inexchange, the swap investor may receive the economic right to someportion of the future appreciation (any appreciation that occurs overthe life of the swap). The appreciation, if any, may be calculated bysubtracting the initial value of the measuring index at the point theswap is entered into from the final value of the measuring index at thetime the option terminates. The swap may terminate at the earliest tooccur of: (i) stated term (if not based solely on transfer of title);(ii) death of the property owner(s) resulting in transfer of title;(iii) sale or attempted sale of the property by the property owner(s);or (iv) breach of the swap and/or investment agreement by the propertyowner(s).

For the investor, the swap and/or investment contract may inherentlyrely on the long-term mean reversion of real estate to a steady,positive appreciation rate (e.g., 4% annualized). As part of the swapand/or investment contract, the risk of loss resulting from the lack ofappreciation of the value of the property in the near term may bemitigated by an early termination provision. In the event the swapterminates prior to the end of the early termination provision, thehomeowner may owe the investor the greater of: a) the appreciation asmeasured by the relevant index; or b) a return of option premium paid tothe homeowner plus costs of origination plus an annual rate of return.If the swap expires after the early termination period, the investor mayonly have rights to the appreciation as measured by the measuring index;if this value is zero or negative in such a scenario the investor mayreceive nothing at contract termination.

The proceeds of the swap may additionally encompass the simultaneoustransference of future negative home price performance (as measured bythe relevant index) from the homeowner to the investor or a third party.The homeowner may in essence sell the upside appreciation in theproperty in order to fund the purchase of an instrument that transfersrisk to a third party (e.g., investor or insurance company). As such,the swap and/or investment system may result in a “cashless” transactionwhereby the homeowner receives the protection provided in lieu of a cashlump sum or periodic payment stream. In this instance the homeowner maybe considered to have “fully hedged” their price risk. The partiesassuming upside appreciation rights and downside depreciation risk,respectively, may be a single party or separate parties.

Investors may own the swap and/or investment contracts directly(appearing on title) or indirectly via a special purpose vehicledesigned to effect the investment. In this case the economic interestscreated via the swap and/or investment contracts may be grouped intoportfolios in the form of investment partnerships, companies, and/orother investment vehicles. The investors provide cash which isultimately transferred, via the investment vehicle, to the homeowner inexchange for the rights to future appreciation (and potentially inconjunction with the investor assuming downside depreciation risk inlieu of paying the homeowner an investment fee). The investment poolperformance and value (or that of an individual swap and/or investmentcontract) may be measured via the current as well as expected cash orcontract value of the swap and/or investment contracts in total, and thederivative risks (e.g., sensitivity to changes in the index, interestrates, assumptions in future real estate index performance andmortality/mobility of homeowners), which may be calculated via processessimilar to those used in computing the parameters of individual optioncontracts and communicated to investors. The swap and/or investmentcontracts (or the subsequent investment vehicles which hold portfoliosof such contracts) may provide investors with synthetic, collateralizedexposure to the underlying properties as measured by the indices. Thisexposure may distinct from a futures contract or a security and may beconsidered an interest in real property.

Contract valuation may be based on either the current or projected cashsettlement value or the amount due at expiry. FIG. 2A illustrates anexemplary valuation procedure, in accordance with one or moreimplementations. The current cash settlement value may be equal to thegreater of shared index appreciation or early termination value. Thecurrent cash settlement value may be calculated based on contract terms,the change in the underlying index and how much time has passed. In thecash flow method of valuation, projected cash settlement value may bedetermined through a series of processes and algorithms that combinecontract terms, property appreciation projections and conditionalprepayment rate vectors (projections of mortality or mobility ofhomeowners which drives contract termination). The combination ofprojected property appreciation and the contractual early terminationprovision may establish projected cash settlement values at specificpoints in the future. Applying a conditional prepayment rate vectoracross these values in time may establish a probabilistic projection ofcash flow per period and, summarily, an expected value. The process maybegin by projecting a future home price index with a single or series ofproperty appreciation scenarios. Next an algorithm may establish thecash settlement value for individual projected periods as the greater ofshared appreciation and early termination value. Next an algorithm mayapply a single or series of conditional prepayment rate vectors toproject cash flow for each period. These probabilistically adjustedfuture cash flows may be discounted back to a present value to arrive ata net present value. By processing the three components (i.e., contractterms, property appreciation, and conditional prepayment rates), theprocess may generate several metrics to value as well as measure andassess the risk and return of the contract. Through this method ofvaluation, exemplary implementations may provide an initial value atorigination, provide periodic valuations over time, and structurevaluation for distribution.

In addition to valuation over time, the valuation processing method mayallow for flexible pricing at origination and ongoing risk assessment.Flexible pricing may be an iterative process where different contractterms are input and modeled. Premium (payment to homeowner) schedulesand amounts may be tailored to homeowner needs whether they are lump sumor annuities. When the process finds an acceptable match of contractteens and investment expectations respectively between homeowner andbuyer, the terms may be set and the application moves forward. Riskassessment may look at the change in value and/or cash flow given achange in one of the parameters and the likelihood of said changeoccurring.

In some implementations, system 100 may include one or more servers 102.The server(s) 102 may be configured to communicate with one or moreclient computing platforms 104 according to a client/serverarchitecture. The users may access system 100 via client computingplatform(s) 104. The server(s) 102 may be configured to execute one ormore computer program modules. The computer program modules may includeone or more of a current-cash-settlement-valuation module 106, aperiodic-cash-settlement-value-projection module 108, aprojected-home-price-index-construction module 110, anearly-termination-value-determination module 112, aconditional-prepayment-rate-vector-determination module 114, aprojected-cash-flow-contract-valuation module 116, astochastic-partial-differential-equation-contract-valuation orstochastic-PDE-contract-valuation module 118, and/or other modules.

The modules 106, 108, 110, 112, 114, 116, and 118 are described, atleast in part, in the context of a contract (e.g., an asset-backed indexswap or an investment contract) in which an owner entity of the firstreal estate property grants to an investor entity an economic right to aportion of future appreciation of the first real estate property inexchange for consideration. Such a contract may expire responsive to atransfer of title of the first real estate property. The owner entitymay include one or more individuals and/or one or more corporateentities (or other legal entities) that, together, own the first realestate property. The investor entity may include one or more individualsand/or one or more corporate entities (or other legal entities) that,together, seek to enter (or have entered) the contract with the ownerentity.

The current-cash-settlement-valuation module 106 may be configured todetermine a current cash settlement value of the contract. The cashsettlement value may be an amount due to the investor entity responsiveto the contract being expired. In some implementations, the cashsettlement value may be equal to the greater of a shared indexappreciation and an early termination value, which may be expressed as:

CSV_(t)=Max[SA_(t), ETV_(t)]  EQN. 1

where CSV_(t), is the cash settlement value at time t, SA_(t) is theshared index appreciation at time t, and ETV_(t) is the earlytermination value at time t. In some implementations, the shared indexappreciation may be a contractual appreciation share multiplied by achange in a designated index multiplied by an initial value of the firstreal estate property, which may be expressed as:

$\begin{matrix}{{SA}_{t} = {{AS} \times \frac{{HPI}_{t}}{{HPI}_{1}} \times {HV}_{1}}} & {{EQN}.\mspace{14mu} 2}\end{matrix}$

Where AS is the contract shared appreciation, H_(P) is the home priceindex at time t, and HV₁ is the initial value. The appreciation sharemay be an amount of future appreciation conveyed by the contract. Thedesignated index may be an index that measures prices residentialhousing. By way of non-limiting example, the designated index may be theSan Diego S&P Case-Shiller Index. The initial value may be the value ofthe first real estate property when the contract is initially placedinto force.

The early termination value may be determined based on an earlytermination provision in the contract. According to variousimplementations, the early termination provision may designate either aset schedule or an accretion model with a base amount plus an annualrate of return for a duration of an early termination period. The earlytermination value may be expressed as:

ETV_(t)=Base Amount×(1+ETR)^(t)  EQN. 3

where ETV_(t) is the early termination value at time t, the base amountis a total contract cost to an investor associated with the contract,and ETR is the early termination rate. Under a set schedule, the earlytermination value may be determined from a table via a look-up based onan age of the contract.

The periodic-cash-settlement-value-projection module 108 may beconfigured to determine future cash settlement values per period basedon one or more of a term of the contract, an appreciation projectionassociated with the first real estate property, or a conditionalprepayment rate vector. The cash settlement value for each projectedperiod may be the greater of a shared index appreciation and an earlytermination value. The shared index appreciation may be a contractualappreciation share. The early termination value may be an amount owed tothe investor entity responsive to the contract expiring during an earlytermination period stipulated in the contracts. The period of determinedfuture cash settlement values may be daily, monthly, quarterly,annually, and/or another period of time.

In some implementations, the combination of projected propertyappreciation and the contractual early termination provision mayestablish cash settlement values at specific points in the future (e.g.,monthly for the next fifty years). Applying a conditional prepaymentrate vector across these points may establish a probabilistic projectionof cash flow. The process may begin by projecting a home price indexwith a single or series of property appreciation scenarios (e.g.,historical, stressed, and/or other scenarios). Following thedetermination of cash settlement values, an algorithm may apply a singleor series of conditional prepayment rate vectors to project cash flowfor each period.

The projected-home-price-index-construction module 110 may be configuredto determine a projected home price index associated with the first realestate property based on one or more home price appreciation vectors.FIG. 3 provides exemplary home price appreciation vectors, in accordancewith one or more implementations. The projected home price index maydescribe appreciation of the first real estate property between aprojection date and a contract termination date. A given home priceappreciation vector may represent a forecast scenario of an outcome ofappreciation of the first real estate property. The outcome mayresulting in an early termination of the contract may be an expectedoutcome, a stressed outcome, a situational outcome, and/or otheroutcome. A home price appreciation vector or series of vectors may benational or associated with the specific designated home price index(e.g., San Diego S&P® Case-Shiller Index®). FIG. 4 provides an exemplaryStandard and Poor's Case-Shiller Index, in accordance with one or moreimplementations. A home price appreciation vector may be constructedbased on information provided by a user of system 100 and/or selectedfrom predefined metrics. A given home price appreciation vector mayinclude one or more of a linear function, a parabolic function, apolynomial function, a sinusoidal function, a stochastic function,and/or other functions. A given home price appreciation vector mayaccounts for one or more of historical index performance, macro-economicfactors, local market demographics, and/or other information.

A starting point of the projected home price index may be equal to acurrent designated index value divided by a contact starting indexmultiplied by one hundred, as expressed by:

$\begin{matrix}{{HPI}_{0} = {\frac{{HPI}_{t}}{{HPI}_{c}} \times 100}} & {{EQN}.\mspace{14mu} 4}\end{matrix}$

where HPI₀ is the current home price index, HPI_(t) is the home priceindex at time t, and HPI_(c) is the contract starting home price index.In some implementations, future index points by period may be determinedbased on a home price appreciation vector, as follows:

HPI_(t)=HPI_((t−1))×(1+HPA_(t))  EQN. 5

where HV_(t) is the home price appreciation at time t. Projected homevalue may be calculated by multiplying the initial home value by theperiod Home Price Index divided by 100, which may be expressed as:

$\begin{matrix}{{HV}_{t} = \frac{\left( {{HV}_{0} \times {HPI}_{t}} \right)}{100}} & {{EQN}.\mspace{14mu} 6}\end{matrix}$

where HV_(t) is the home value at time t, HV₀ being the initial homevalue.

The early-termination-value-determination module 112 may be configuredto determine an early termination value of the contract. The earlytermination value may be an amount due to the investor entity in theevent that the contract is terminated during an early termination periodset forth in the contract. The early termination period may be describedin an early termination provision in the contract. The contract earlytermination provision may exist to incent the owner entity to notterminate the contract for a sufficient period of time, thus mitigatingthe effect of near-term volatility and/or negative performance in themeasuring index for the investor entity. In some implementations, if theowner entity terminates the contact early through a transfer of title orother such contract designated termination, the investor entity mayreceive the greater of their participation share of appreciation (e.g.,as measured by the measuring index) or the early termination valueamount set forth in the contract, which may be expressed as:

ETV_(t)=Base Amount×(1+R)^(t)  EQN. 7

where ETV_(t) is the early termination value at time t, Base Amount isthe early termination value “Principal” (e.g., contract cost), and R isthe early termination provision annual accrual rate. The earlytermination value may be zero in the event that the contract isterminated after the early termination period set forth in the contract.

The conditional-prepayment-rate-vector-determination module 114 may beconfigured to determine conditional prepayment rate vectors associatedwith the contract. A given conditional prepayment rate vector (or seriesof such vectors) may represent a prepayment scenario based on astatistical likelihood the contract will terminate within a givenperiod. According to some implementations, a probability of the contractsurviving to a given period may be expressed as:

P _(t) =P _(t-1)*(1−CPR_(t))  EQN. 8

where P_(t) is the probability of contract surviving to time t andCPR_(t) is the conditional prepayment rate at time t. A probability ofthe contract terminating during a given period may be expressed as:

q _(t) =P _(t-1)*CPR_(t)  EQN. 9

where q_(t) is the probability of contract terminating in time t.

Two components of the conditional prepayment rate may be sale of theproperty or the death of the owner entity resulting in a transfer oftitle. The prepayment rates may be conditional to multiple factors,which may change the period rate. Examples of such factors may includeone or more of demographic information associated with the owner entity,home price index performance, a proximity to contract origination, anearly termination provision, model stressing and/or other factors.Because the contract may be terminated by transfer of title, there areseveral potential prepayment rate sources. Examples of sources ofprepayment rates may include one or more of mortality tables, housingturnover rates, conforming residential mortgage-backed securityprepayment rates, historical contract prepayment rates and/or othersources. FIG. 5 provides exemplary baseline prepayment rates, inaccordance with one or more implementations. Conditional prepayment ratevectors may draw directly from prepayment tables and may apply either ano termination period or a multiplier to the table prepayment rate. FIG.6 provides exemplary conditional prepayment rate vectors, in accordancewith one or more implementations. To illustrate an exemplaryimplementation, by way of non-limiting example, the prepayment rate fora 75 year old female may be 3.81%. A 200% conditional prepayment ratevector may use a prepayment rate of 2×3.81% (7.62%) for a single 75 yearold female not within a no-termination period. A no-termination periodmay vary to simply include the first couple of contract years or for aslong as the early termination provision term itself. A conditionalprepayment rate vector may be dynamic and may change over time. This, inturn, may change future new contract terms or in facilitating thedistribution of aged contracts.

The projected-cash-flow-contract-valuation module 116 may be configuredto determine a value of the contract based on cash flow associated withthe contract by summing discounted projected cash flows for futureperiods. A given projected cash flow for a given period may be thegreater of the shared home price appreciation and the early terminationvalue, multiplied by the conditional prepayment rate, where the sharedhome price appreciation equals period home price index divided by thestarting home price index multiplied by the initial home value. Thegiven projected cash flow for the given period may be discounted by atarget return to arrive at a present value. According to someimplementations, the projected cash flow may be expressed as:

CF_(t)=Max[SA_(t),ETV_(t)]×CPR_(t)  EQN. 10

where CF_(t) is the projected cash flow at time t, SA_(t) is the sharedappreciation at time t, ETV_(t) is the early termination value at timet, and CPR_(t) is the conditional prepayment rate for time period t. Theshared appreciation may be expressed as:

$\begin{matrix}{{SA}_{t} = {\frac{{HPI}_{t}}{{HPI}_{1}} \times {HV}_{1}}} & {{EQN}.\mspace{14mu} 11}\end{matrix}$

where HPI_(t) is the home price index at time t and HV_(t) is the homevalue at time t. The early termination value may be expressed as:

ETV_(t)=Base Amount×(1+ETR)^(t)  EQN. 12

where Base Amount is the early termination value “principal” (e.g.,contract cost) and ETR is the early termination rate. The net presentvalue of the contract may be expressed as:

$\begin{matrix}{{NPV} = {\sum\left\lbrack \frac{{CF}_{t}}{\left( {1 + {DCR}} \right)^{t}} \right\rbrack}} & {{EQN}.\mspace{14mu} 13}\end{matrix}$

where NPV is the net present value and DCR is the discount rate.

The stochastic-PDE-contract-valuation module 118 may be configured todetermine probability of expiry per period. A given probability ofexpiry for a corresponding period may be based on a probability of atransfer of title of the first real estate property during thecorresponding period. Transfer of title may be effected by either a saleby the owner entity of the first real estate property or death of theowner entity resulting in transfer of title.

According to some implementations, the contract may have at least twounique characteristics, which may create challenges when attempting tovalue by traditional approaches. First, the contract may not have afixed expiry; rather it may expire when the owner entity transfers titlevia mortality or mobility (i.e., sale), or otherwise breaches thecontract. Consequently, the contract's expected expiry may not be afixed point in the future but a probability distribution (e.g., acombination of mobility and mortality) stretching forward in time.Second, the contract may have a return floor as defined in the earlytermination provision in the event that this amount is greater than theappreciation that would otherwise be due under the contract. Thus, theremay be an additional value or optionality to be considered since thecontract may not only provide a swap on growth, but also a secondarycomponent based on the early termination provision. In order toincorporate the unique characteristics of the contract and unknownexpiry, a probabilistic valuation approach may be used to value thecontract.

The stochastic-PDE-contract-valuation module 118 may be configured todetermine a present value of the contract using a probabilistic modelbased on the future cash settlement values for periodic expires, and theprobabilities of expiry for corresponding periods. In someimplementations, the probabilistic model is a modified Black-Scholesmodel. The modified Black-Scholes model may be a Black-Scholes modelthat is modified by (1) synthetically replicating the contract withcommonplace contracts puts and calls, (2) solving for a value of thecommonplace contracts puts and calls across all possible monthlyexpires, and (3) multiplying the value of the commonplace contracts putsand calls by the conditional prepayment rate or a probability of expiryin individual periods. The sum of these products may yield the correct,probabilistically adjusted modified Black-Scholes value of the contract.

In some implementations, the contract may be viewed as the followingposition: (1) long the at-the-money (“ATM”) call (all expires from onemonth through fifty years), (2) short the ATM put (all expires from onemonth through ten years), and (3) long the[(ATM+(Premium+Origination))×(1+ETP Rate)t] put (all expires from onemonth through ten years and where t=1 month through 10 years). This“moving strike” of the long put position may accounts for the ETVfunction, which grows over time and thus is of a different value in eachmonthly period. This 3-way structure may be summarily valued as a seriesof monthly expires, each being multiplied by the probability of expiry(e.g., mobility or mortality) actually occurring in each discrete timeperiod. The sum of these probabilistically adjusted values may bedescribed as the modified Black-Scholes (“MBS”) value of the option.This value may be used to determine theoretical acquisition margin(i.e., the difference between the price paid to the owner entity for thecontract and its theoretical value as described by the modifiedBlack-Scholes approach). Acquisition margin may be used as a potentialorigination threshold to be met for the buyer of the contract. Forexample, only contracts with an acquisition margin of 30% may be deemedacceptable, in accordance with some implementations.

A unique feature of the modified Black-Scholes model is its ability todeliver sensitivities to changes in underlying inputs such as volatility(“vega” or change in option value per change in volatility), risk-freerate or discount rate (“rho” or change in option value per change ininterest rate), HPA measuring index (“delta” or change in option valueper change in index), and/or other inputs. These derivative risks may beused to determine risks or sensitivities to changes in rate, indexlevel, and/or other metrics. The derivative risks, in actual practice,may be used to hedge or eliminate some individual option risk and/ortotal portfolio risks. These derivative risk values may be viewed asacceptability thresholds for origination. For example, only contractsthat yield more than a fifty basis point increase in value per 1%increase in HPA may be deemed acceptable, in accordance with someimplementations.

According to some implementations, the modified Black-Scholes value andthe HPA measuring index may be expressed, respectively, as:

MBS=Σ_(t=1) ^(T)[CPR_(t)×(C _(S,t) −P _(S,t) ¹ +P _(S,t) ²)]  EQN. 14

Delta(Δ)=Σ_(t=1) ^(T)[CPR_(t)×(CΔ _(S,t) −PΔ _(S,t) ¹ +PΔ _(S,t)²)]  EQN. 15

where:

MBS = Modified  Black-ScholesC_(S, t) = N(d₁)S − N(d₂)K¹^(−r(T − t))P_(S, t)¹ = N(−d₂)K¹^(−r(T − t)) − N(d₁)SP_(S, t)² = N(−d₂)K²^(−r(T − t)) − N(d₁)SC Δ_(S, t) = ^(−t)Φ(d₁)P¹Δ_(S, t) = ^(−t)Φ(−d₁), where  k  in  d₁ = K¹P²Δ_(S, t) = ^(−t)Φ(−d₁), where  k  in  d₁ = K²$d_{1} = \frac{{\ln \left( \frac{S}{K^{1}} \right)} + {\left( {r + \frac{\sigma^{2}}{2}} \right)\left( {T - t} \right)}}{\sigma \sqrt{\left( {T - t} \right)}}$$d_{2} = \frac{{\ln \left( \frac{S}{K^{1}} \right)} - {\left( {r + \frac{\sigma^{2}}{2}} \right)\left( {T - t} \right)}}{\sigma \sqrt{\left( {T - t} \right)}}$(T − t) = Time  to  MaturityS = Spot  price  of  the  underlying  assetK¹ = Strike  Price = Initial  Home  Value  or  Contract  HomePrice  Index K² = Strike  Price = Early  Termination  Valuer = risk  free  rate σ = volatilityΦ = standard  normal  distribution  function

According to some implementations, when a new contract application isreceived, the proposed contract terms may be run through valuationprocedures and subjected to multiple scenarios and return hurdles. FIG.2B illustrates an exemplary origination procedure with the valuationprocedure of FIG. 2A, in accordance with one or more implementations.The application represents a new contract with zero cash settlementvalue. Valuation scenarios may include one or more of an expectedscenario, a stressed scenario, a situational scenario, and/or otherscenarios. If the proposed contract achieves minimum return and riskmetrics, it may be approved for origination and forwarded tounderwriting. If the proposed contract significantly underachievesminimum return and risk metrics, it may be declined. If the proposedcontract misses the minimum metrics within a designated range, then theapplication, may be flagged for review. The proposed contract terms maybe accepted as is, or may be modified and resubmitted until theapplication is approved. This process may continue until the investorentity and owner entity find mutually acceptable terms or agree that nosuch terms exist.

In an expected scenario, proposed contract terms and homeownerdemographics may be entered into a processor and/or pulled from arelational database. The expected home price appreciation andconditional prepayment rate vectors may be pulled into the processorfrom a relational database. An algorithm may construct the resultingexpected cash flow, return, risk, and/or other metrics. The expectedinternal rate of return or “IRR” may be compared to the investorentity's target return. If the expected IRR is greater than the investorentity's target return the proposed contract terms are flagged aspassed. If the expected IRR is significantly lower than the investorentity's target return, the proposed contract terms may be flagged asfailed. If the expected IRR is below the investor entity's target returnbut within a designated threshold, then the proposed contract terms maybe flagged for review.

In a stressed scenario, proposed contract terms and homeownerdemographics may be entered into the processor and/or pulled from arelational database. The stressed home price appreciation andconditional prepayment rate vectors may be pulled into the processorfrom a relational database. An algorithm may construct the resultingexpected “stressed” cash flow, return, risk, and/or other metrics. Theexpected IRR may be compared to the investor entity's target stressedreturn. If the expected IRR is greater than the investor entity's targetstressed return, the proposed contract terms may be flagged as passed.If the expected IRR is significantly lower than the investor entity'starget return, the contract terms may be flagged as failed. If theexpected IRR is below the investor entity's target stressed return butwithin a designated threshold, then the proposed contract terms may beflagged for review.

In a severe stress scenario, proposed contract terms and homeownerdemographics may be entered into the processor and/or pulled from arelational database. The stressed home price appreciation andconditional prepayment rate vectors may be pulled into the processorfrom a relational database. An algorithm may construct the resultingexpected “stressed” cash flow, return, risk, and/or other metrics.

The expected IRR may be compared to the buyer's target stressed return.If the expected IRR is greater than the investor entity's targetstressed return, the proposed contract terms may be flagged as passed.If the expected IRR is significantly lower than the investor entity'starget return, the proposed contract terms may be flagged as failed. Ifthe expected IRR is below the investor entity's target stressed returnbut within a designated threshold, then the proposed contract terms maybe flagged for review.

Additional scenarios may be run as necessary for reasons including butnot limited to additional buyer requirements or risk return thresholds,macro-economic conditions and special circumstances such asnon-traditional contract terms return hurdles or risk parameters.

Three cases are described across multiple aspects of origination, inaccordance with some implementations. These cases are not intended to belimiting, but rather merely illustrate applications of exemplaryimplementations. Case 1 illustrates an approved contract and thevaluation review applied. Case 2 illustrates Flexible Pricing whereproposed contract terms are customized in order to receive approval.Case 3 illustrates an application decline due to insufficient economics.FIGS. 7A-7S provide exemplary information associated with these threecases.

In Case 1, a retired couple in San Diego, Calif. wishes to sell 100% ofthe future appreciation in their home for cash. They are on a fixedincome and expect to be living in their home for at least ten years.They will be using the cash to purchase long-term care coverage. Theirtwo children are grown with families and homes of their own out ofstate. The couple would like to retain the equity in their home andavoid loan payments based on their income status. They would like tofund their grandchildren's education with any remaining proceeds fromthe sale of the home after their death or incapacitation. Propertymetrics include: location—San Diego; appraised value—$1,000,000; and/orother property metrics. Homeowner demographics include: gender—couple;age youngest—72 years old; and/or other homeowner demographics.

A private investment fund is looking for access to residential realestate appreciation as an asset uncorrelated to their current portfolio.They currently believe the U.S. market is near the bottom. They have atarget return (IRR) of 10%, a tolerance for a 5% return in a down marketand a minimal loss of capital and no gain in a severe market.

The proposed contract terms and homeowner demographics are entered intothe system processor. The contract premium is set at 16% of home value,the current maximum available. The Early Termination Provision is thecontract cost (16%+2% origination fee) accreting at 10% per annum for aterm of 10 years. Based on location, the property is linked to the S&P®San Diego Case-Shiller Index® to track future growth. The system pullsexpected, stressed and severe stress HPA and CPR vectors and uses analgorithm to calculate cash flow.

In an expected scenario, with an expectation of long-term mean reversionof real estate markets, the investor entity sets the expected Home PriceAppreciation Vector to equal historical performance. They want to viewprojected returns using both a linear and sinusoidal (cyclical)projection based on historical mean and standard deviation. Based onexpected property values (larger than properties considered for smalleror conforming reverse mortgages) and homeowner age demographics, theinvestor entity selects a Non-Conforming (Jumbo) Reverse MortgagePrepayment table. Based on these parameters and Linear HPA, the modelprojects a 10.0% investor IRR resulting in a Return Test of “Pass”. TheHistorical-Cyclical HPA starting at the bottom projects a 10.6% IRR. Asan additional hurdle, the investor entity also wishes to assessTheoretical Margin (“TM”) for the purpose of approving a deal and inthis case requires at least $100,000 of TM. The model in this caseoutputs a Theoretical Margin of $135,000 determined via stochasticpartial differential equation, also resulting in a Return Test of“Pass”.

In a stressed scenario, the Stressed HPA Vector for San Diego is set at50% of historical average with a target IRR of 5%. Under this scenariothe buyer wants to test various projections and the resulting IRR. Anexample of Stressed Linear HPA (50% of Historical) with normalprepayments, with IRR=5.7%, is discussed below. An example of StressedCyclical from the bottom with normal prepayments, with IRR=5.9%, isdiscussed below. An example of Stressed Linear with no prepaymentsduring ETP Term, IRR=5.1%, is discussed below. An example of StressedCyclical Bottom with no prepayments during ETP Term, with IRR=5.4%, isdiscussed below.

In a severe stress scenario, the Severe Stress HPA Vector is set to a34.5% decline over 3 years followed by an annual rate of 3.23%. Againunder this scenario the buyer wants to test multiple prepayment vectors.An example of normal prepayments, with IRR=1.0%, is discussed below. Anexample of no prepayment during ETP Term, with IRR=−0.2%, is discussedbelow. The investor entity may deem the risk to be minimal based on thelow likelihood of the severe market decline and the expected IRR beingwithin 20 basis points of target return.

Flexible pricing may be provided in some implementations. The contractmay provide owner entities and investor entities customized contracts tonegotiate and solve for mutually acceptable terms. By way ofnon-limiting example, the expected IRR may be 9.5%. Reducing ContractPremium to 14% may raise expected IRR to 10.1%, above the target ERR. Ifthe investor entity's outlook changes, where they now view the U.S.residential real estate to be at the top of a market cycle, ETP could bemodified (i.e., longer time period or increased accrual rate). This maydiscourage early prepayment and allow more time for the home toappreciate. By changing the HPA Vector to Historical Cycle Top, theexpected IRR may drop from 10.1% to 9.7%. Conversely, an increase of ETPfrom 10 Years at 10% to 12 years at 12%, Expected IRR may increase to10.0%. If the owner entity finds this too onerous, they could reduce thecontract premium or withdraw the application. It may be this dynamicpricing that allows for custom contracts for both homeowner andcounterparty, in some implementations.

Contract applications may be declined for one or more reasons. Toillustrate, a property in the Detroit area is considered, withdemographics otherwise similar to the San Diego or Seattle examples.Despite cutting the contract premium in half, the relatively poorhistorical performance of Detroit may result in an IRR that does notmeet target. This case may be declined and may not be salvageable.

Once the contract has been originated, the model may be used within aprocess that includes one or more of servicing, contract valuation,portfolio management, and/or other components. FIG. 2C illustrates anexemplary management and/or monitoring procedure with the valuationprocedure of FIG. 2A, in accordance with one or more implementations.Servicing may include monitoring the underlying property assets throughperiodic title checks, insurance verification, property valuation andproperty tax status. Servicing data may be part of a feedback loop usedto build, validate or update modeling components inclusive of, but notexclusive to, home price appreciation and prepayment rate vectors.Contract valuation may be calculated within the model. Contractvaluation may provide valuation metrics, which may include one or moreof indexed based appreciation, early termination value, cash settlementvalue, discounted cash flow value, and/or other valuation metrics.Portfolio management is an extension of the modeling process whichincludes portfolio aggregated values, cash management, risk managementand portfolio optimization.

Managing the contract may include monitoring the underlying propertyassets. Through various reporting agencies and outside vendors, periodicchecks may be conducted on contract properties. Checks may include, butare not exclusive to, transfer of titles, property listing (for sale),mortality events, insurance verification, property valuation, propertylien status, and/or other actions. In some implementations, transfer oftitle through a mortality event or property sale may be terminationtriggers. A termination trigger may begin a process for collection ofsettlement value. Timing and trigger type (e.g., mortality or sale) maybe tracked, and may be processed to measure against expected ConditionalPrepayment Rates. This data may be used to track expected prepayments(e.g., initial CPR tables) versus actual prepayments. Statisticallysignificant data may be used to update prepayment rates used invaluation and origination embodiments. For example, if actual mortalityis observed at a lower rate than expected, expectations may be modifiedto conform with portfolio experience. Insurance and lien status checksmay be conducted to ensure the underlying property is in good order andnot subjected to technical triggers such as not maintaining properinsurance and property taxes. Any technical default trigger may initiatea review process, according to some implementations. Property valuation,whether through formal appraisals or automated valuation models (“AVMs”)may be used to: 1) measure tracking error of the property to the index(i.e., whether or not the actual value of the property is conforming toexpectations set by the movement in the index); 2) monitor home pricesto possibly influence expectations of home price appreciation (HPAvectors); and/or for other purposes. Measuring tracking error may assistin monitoring basis risk or the risk associated with the underlyingasset not performing to the level of the index. For example, a propertythat significantly underperforms its measuring index and is encumberedby a pre-existing loan may ultimately not yield sufficient proceeds topay the cash settlement value as determined by the index. Monitoringhome prices when combined with other macro-economic data such as thelocal affordability index may be used to shape future appreciation muchin the way actual termination rates may shape and adjust expectedterminations going forward. More specifically, this data may also beused to determine the markers position within the cycle of home priceappreciation. Gathering, analyzing, and applying servicing data mayprovide a vital feedback loop to the valuation modeling process.

Valuation may be included in managing and/or monitoring the contracts.Valuing a contract or portfolio of contracts may be necessary forfinancial accounting, measuring performance, potential market sale,and/or other purposes. Exemplary methods for valuing a contract mayinclude one or more of index based appreciation, early terminationvalue, cash settlement value, discounted cash flow, partial differentialfunctions. Modified Black Scholes, other forms of stochastic modeling,and/or other valuation methods. In some implementations, contractvaluation may be completed through a series of algorithms starting withthe shared index based appreciation and early termination value. Nextcash settlement value may be determined as the greater of shared indexbased appreciation or early termination value. Cash settlement value mayrepresent the contract's intrinsic value and the amount due to theinvestor entity if the contract expires on the projection date.Extrinsic value may be described as the quantified future value of thecontract. The discounted cash flow method may do this by projecting cashflow from home price appreciation vector and prepayment rate vector.

Some implementation may relate to portfolio management. Portfoliomanagement may include one or more of: 1) portfolio valuation; 2) cashmanagement; 3) risk management; and/or other aspects of portfoliomanagement. Portfolio valuation may be described as the aggregate valueof portfolio contracts or a valuation derived from the expectedportfolio cash flow as a whole. Cash management may be described as thetracking of sources and uses of cash. The primary sources of cash mayinclude new capital and contract maturities resulting in cashsettlements. Expected cash flow from contract expiry may be generatedwithin the model using prepayment rates (e.g., CPRs) and any pertinentdata from servicing (e.g., contract properties with sales pending, deathnotices, and/or other servicing data). The uses of cash may include, butnot exclusive to, new contract origination, annuity payments, fees andexpenses, and/or other uses of cash. New contract origination may betracked through the sales pipeline and bank of approved contract terms.Annuity payments may be known from the portfolio of annuity contracts.Risk in the portfolio may be defined and quantified as the change intotal value based on a change in input assumptions. For example, HPArisk or sensitivity to changes in home price appreciation may bedetermined by using the valuation model(s) to determine total change invalue based on a 1% increase or decrease in HPA assumptions. Riskmanagement subsequently may be the identification and mitigation of riskresulting in improved portfolio risk adjusted return. For example,valuation of the portfolio and analysis of sensitivity to various HPAshocks may show an undue concentration of risk around the San FranciscoMSA. As a result, investors may decrease buying of that particular MSA(decrease premium and/or demand a greater return for contracts usingthat measuring index), or alternatively attempt to reduce total exposureto the San Francisco MSA through other financial instruments. Portfolioenhancements that may improve risk adjusted return may include one ormore of geographical diversification, demographic diversification,contract type mix (e.g., lump sum versus annuity), and/or otherenhancements. In an illiquid market for the contracts, portfolioenhancements may be limited to the origination phase of portfolioconstruction (i.e., the only way to change portfolio risk profile is tooriginate new, different contracts), whereas in a developed, liquidmarket, individual contracts may be bought and sold between investors.

By way of non-limiting illustration, a case is considered for the fifthcontract year since origination. Real estate in San Diego has reboundedwith the index growing at an annual rate of 5.7%. Macro-economicindicators suggest the area has reached the top of a cycle and willbegin to slow within the near future. As a part of servicing theproperty, monitoring reports the following: no transfer of title throughsale or death; no public sale listing; no reported death event; propertyinsurance is in good standing; no additional liens on title; andproperty taxes have been paid. Based on the new real estate outlook, thevaluation process may determine the following: Index Based SharedAppreciation is $318,905; Early Termination Value is $289,892; CashSettlement Value $318,905; NPV@10.0% is $316,000; Modified Black-SholesValue is 555,500; and Theoretical Margin is $239,500. The privateinvestment fund updates their accounts with a value of $318,905 holdingthe asset at the Cash Settlement Value. This represents an unrealizedgain of 77.2% or 12% annually. Based on the Modified Black-Scholes valueof $555,500 there is still significant, potential gains within thecontract. The Modified Black Scholes indicators show that the option isnow behaving very similarly to the underlying index. The option exhibitsa 78% delta, meaning for every 1% increase or decrease in the SanFrancisco index, the option MBS theoretical value will similarlyincrease or decrease in value by 78 basis points. Put differently, theoption is behaving equivalently to an underlying index exposure of 78%of its face value (78% of $1 MM=$780,000). Because the portfolio isalready heavily exposed to the San Francisco index, the manager decidesto sell short a Case-Shiller/San Francisco future contract on theChicago Mercantile Exchange, thus eliminating this contract's exposureto the San Francisco Index. Since the San Francisco index is currentlyat 148.1, the value of a CME contract is $37,025 ($250×index value).Using the model, the manager determines he must sell 21 contracts to($780,000137,025=21.06) to fully hedge this option's exposure to theindex.

As another non-limiting illustration, a second case is considered forthe fifth contract year. Real estate in Seattle has appreciated at 2%per year, well below historical average of 3.8%. A watch has been placedon the contract. The watch is triggered based on a risk to EarlyTermination Value. The contract is five years into the Early TerminationTerm with five years remaining. Based on the Prepayment Rate derivedSurvival Curve, the contract has a greater than 50% probability ofsurviving through the Early Termination Provision Term. The EarlyTermination Value in year 10 will reach $415,000. If the indexappreciates at historical average or less for the remainder of thecontracts, Shared Appreciation will not surpass ETV, resulting in awrite-down in Cash Settlement Value (the greater of ETV or index-basedappreciation) as soon as the early termination period expires in year11. Macro-economic indicators still suggest the area is trending at thebottom of a market cycle. Property servicing reports everything is ingood standing. Based on the new real estate outlook, the valuationprocess may determine the following: Index Based Shared Appreciation is$104,081; Early Termination Value is $257,682; Cash Settlement Value$257,682; NPV@10.0% is $156,000; Modified Black-Sholes Value is$367,000; and Theoretical Margin is $211,000. The private investmentfund updates their accounts with a value of $257,682 holding the assetat the Cash Settlement Value. However, based on watch the fund haselected to book a reserve Cash Settlement Value (an as yet unrealizedgain) bringing the net value down to $156,000, equivalent to the NetPresent Value as determined by a discount rate of 10%. Collectively thetwo cases contribute $474,905 (318,905+156,000) to portfolio value and aprobabilistic cash flow of $36k (22,465+13,419) and $40k (24,998+15,291)over the next two years.

Distribution may represent a phase of risk transference from an ownerentity to the hold-to-maturity investor entity in one or more contracts.Distribution may be described as an aggregation and sale of contracts toindividual investor entities or pooled groups of investor entities in alegal entity which may include a hierarchy or priority of capital flowsand investor rights. The vehicle of distribution can take many forms.Examples of such forms may include one or more of a limited partnership,an offshore corporation, a private real estate investment trust or“REIT”, a registered (public) non-traded REIT, a publicly offered andtraded REIT, a structured product or securitization (e.g., securitiesoffered by a bank written against the values and cash flows of aselected portfolio of contracts), and/or other forms of distributionvehicles.

Regardless of the final form, the same valuation models and processesfor valuation via quantification of expected cash flows and risksthereof may be used to execute the distribution phase by placing a valueon the portfolio of contracts as a whole. Put differently, valuation ofa structure that houses a portfolio of contracts may be an extension ofthe valuation method for individual contracts; the same processes thatare used to project and stress future cash flows may be used to rate andsecuritize a portfolio of contracts, in accordance with someimplementations.

Capital structures may include, but are not exclusive to, pooled(equity) investment and (debt) securitization. A capital structure maybe described as an assignation of the aggregated cash flows to differentclasses of investors within the pooled investment. Securitization may bedescribed as the issuance of debt backed by a specific pool of assets.Debt may be structured or trenched in such a way as to further segmentrisk into different durations, risk levels, return types (e.g., fixed orvariable, coupon or balloon, and/or other return types), and/or othersegmentations. Segmentation may be achieved through the application ofprocess instructions that designate the allocation of cash across thecapital structure (a “waterfall”). Because debt lies above equity in thecapital structure hierarchy, securitization may be used to provide lowerrisk access to riskier assets. Debt tranches may be listed and rated bya public rating agency, further lowering the perceived riskiness of theinvestment.

The contract valuation processes described herein may include cash flowaggregation and scenario testing. For structure valuation for thepurpose of distribution (sale) and completion of risk transference, theprocess may be repeated with individual contract values and projectedcash flows aggregated into portfolio values and cash flows. In the caseof pooled investment vehicles, valuation processes described herein maybe used to arrive at unit share price, initial public offering price,and/or other information associated with valuation. The projectedportfolio cash flow may be passed through the capital structure;different components of the structure (equity vs. debt, debt ofdifferent seniority) yield risk/reward metrics and valuation specific toeach component. FIG. 2D illustrates an exemplary distribution procedurewith the valuation procedure of FIG. 2A, in accordance with one or moreimplementations.

A table or database of pre-selected contracts and their terms may becreated for aggregation. The home price appreciation and conditionalprepayment rate vectors may be selected based on the desired scenario.One-by-one contracts may be loaded into the processor along with the twovectors. Vectors may be probabilistic or deterministic applications. Aseries of processes and algorithms may determine individual values andprojected cash flows. Individual contract value and projected cash flowmay be aggregated into a portfolio cash flow and saved to a table ordatabase.

A capital structure may be entered or loaded from a table or databaseinto a processor. A capital structure may be described as a procedure orseries of procedures which assigns cash flow to one or more capital debtand/or equity components. An algorithm processes the portfolio cash flowthrough the capital structure.

Return and risk metrics for individual capital structure components maybe determined, and outputted or recorded to a table or database.

Once complete, another algorithm may summarize the series of results forindividual capital structure components. Processor output may include,but is not limited to, mean return, return range, return variance,frequency of returns, return semi-deviation, number of defaults, and/orother output.

Distribution may be described as the monetization or sale of contractsfrom one investor entity or group of investor entities to another.Valuation for distribution may be aggregate value or cash flow for allcontracts within a portfolio. Several scenarios may exist. For example,a first scenario may be the sale of contracts based on the net presentvalue of future cash flow. A second scenario may be the sale of theportfolio based on current cash settlement value. A third scenario maybe the transfer of contracts into a securitization vehicle.

In the first scenario, an offshore corporation in conjunction with aninvestment bank may purchase the portfolio and divide ownership amongstlimited partners around aggregate cash settlement value.

In the second scenario, the portfolio may be bundled and sold into anon-traded REIT. The REIT would issue 10 million shares at $10.00 for atotal market cap of $100 million. The $100 million may be divided prorata across contracts based on the net present value of cash flowsdiscounted at 10%. In the second scenario, the contract would represent0.316% ($316k/$100 M) of portfolio value.

In the third scenario, a portfolio of contracts may be securitized via astructured product (rated bonds) offering which is purchased by apension. A pension fund may seek exposure to U.S. residential realestate. The fund manager may like the collateralized indexation offeredby the contracts described herein. However, the available capital mayhave a mandate to be invested in AA or better rated debt with a 30-yearTreasury+200 point spread. Working with an investment bank and ratingagencies, a private fund may submit the selected book of contracts to bestructured for securitization. The rating agency may define variousstress scenarios (e.g., HPA scenarios as well as termination rates suchas stressed CPR). The portfolio may be modeled in line with thevaluation process. A Monte Carlo simulation may establish a probabilitydensity function for dependent variables like prepayment rates. Theexpiry period may be determined by a random number generator and the %Survival Curve for the contract. A random number between 0 and 1 may begenerated, and the best match may be located along the % Survival Curve.In the illustrated example, the random number generator may pick anumber along the % Survival Curve that corresponds to projected year 3or contract year 8. For this simulation run, the contract may contribute$560,713 to the portfolio cash flow, three years from the projectiondate. The aggregate cash flow streams maybe processed through a capitalstructure designed to maximize the size of the AA rated tranche.

When complete, the private fund may sell the portfolio into a trust. Theportfolio may be partitioned into two debt tranches and one equity pool.The two debt tranches may be issued ratings of AA and BBB. The pensionfund may buy the AA rated tranche from the trust. The BBB tranche may besold to another fund. The private fund may retain the equity pool andsell the contracts into the trust at a price equal to a net presentvalue derived via an 8% discount rate. Reviewing Case I, the contractmay be originated for $180,000 and sold into the trust for $389,000 orthe NPV @ 8% price. The private fund may earn 116.1% ROI or 16.7% IRR.The owner entity may use the $180,000 to secure Long-Term Care insurancewhile comfortably remaining in their home.

FIG. 8A illustrates an exemplary period data procedure and an exemplarytime series data procedure, in accordance with one or moreimplementations. In the period data procedure, processor 20 may includeone or more of a Shared index Based Appreciation Value engine 21, EarlyTermination Value engine 22, a Cash Settlement Value algorithm 23,and/or other components. The Shared Index Based Appreciation Valueengine 21 may receive inputs from the Measuring Index database 11 andContract Terms database 12. The Shared Index Based Appreciation Valueengine 21 may determine the contractual shared appreciation value basedon the measuring index. The Early Termination Value engine 22 maydetermine the Early Termination Value based on the Early TerminationProvision inputs pulled from the Contract Terms. The Early TerminationProvision may be a schedule of specific amounts or be an accretion modelassociated with a base amount. A more complete explanation of the EarlyTermination Provision may be found herein.

The Cash Settlement algorithm 23 may determine the Current CashSettlement Value 23 a as the greater of Shared Index Based Appreciationor Early Termination Value for the current period.

In the time series data procedure, processor 30 may include one or moreof a Home Price Appreciation engine 31, Early Termination Value engine32, Cash Settlement Value algorithm 33, Conditional Prepayment Rateengine 34, Weighting Calculation engine 35, a Net Present Valuealgorithm 36, and/or other components. The Home Price Appreciationengine 31 may determine the Home Price Appreciation Vector and ProjectedHome Price Index for the projection horizon based on inputs receivedfrom the Home Price Appreciation Data tables 13 and Contract Termsdatabase 14. The Early Termination Value engine 32 may determine theEarly Termination Value series for the projection horizon based on theEarly Termination Provision from the Contract Terms database 12. Aseries may be equal to a string of periods within the projectionhorizon, e.g., monthly for the next 30 years. The Cash Settlement Valuealgorithm 33 may determine the Cash Settlement Value series for eachperiod within the projection horizon. Using inputs from the ContractTerms database 12 and Prepayment Data tables 14, the ConditionalPrepayment Rate engine 34 may determine the percent Survival Rate Series34 a and Expiry Rate Series 34 b. The Cash Settlement Value series 33 aand Expiry Rate series 34 b is fed into the Weighting Calculation engine35 to determine the probability weighted Cash Flow series 35 a. The NetPresent Value algorithm 36 may determine the Net Present Value 36 a fromthe Cash Flow series 35 a.

FIG. 8B illustrates an exemplary modified Black-Scholes value and Greeksprocedure and an exemplary portfolio aggregation and value process, inaccordance with one or more implementations. In the modifiedBlack-Scholes value and Greeks procedure, processor 40 may include oneor more of a Modified Black-Scholes engine 41, Conditional PrepaymentRate engine 42, a Weighting Calculation engine 43, and/or othercomponents. The Modified Black-Scholes engine 41 may determine theseries MBS values from inputs 15 and contract terms pulled from theContract Terms database 12.

Valuation and/or risk management may be based on a modifiedBlack-Scholes model by replicating the contract(s) with standard putsand calls, according to some implementations. The Conditional PrepaymentRate engine 42 may pull data from the Prepayment Data tables 14 and feedthe Expiry Rate Series into the Weighting Calculation engine 43. TheWeighting Calculation engine may aggregate and may determine theModified Black-Scholes Value and Greeks 43 a.

In the portfolio aggregation and value procedure, processor 40 mayinclude one or more of a Portfolio Aggregator 51, a StructureApplication engine 53, and/or other components. The Portfolio Aggregator51 may receive the Procedural Outputs (23 a, 35 a, 36 a, 43 a) from theprocedures described above and aggregates the values and cash flowseries. The Structure Application engine 53 may apply the CapitalStructure 52 to the Aggregate Cash Flow series 51 a to calculate thePortfolio Valuation 53 a. The processors disclosed in connection withFIGS. 8A and 8B may be, at least partially, the same as or similar toprocessor(s) 124 (see FIG. 1), as described further herein.

In some implementations, server(s) 102, client computing platform(s)104, and/or external resource(s) 120 may be operatively linked via oneor more electronic communication links. For example, such electroniccommunication links may be established, at least in part, via a networksuch as the Internet and/or other networks. It will be appreciated thatthis is not intended to be limiting, and that the scope of thisdisclosure includes implementations in which server(s) 102, clientcomputing platform(s) 104, and/or external resource(s) 120 may beoperatively linked via some other communication media.

A given client computing platform 104 may include one or more processorsconfigured to execute computer program modules. The computer programmodules may be configured to enable an expert or user associated withthe given client computing platform 104 to interface with system 100and/or external resource(s) 120, and/or provide other functionalityattributed herein to client computing platform(s) 104. By way ofnon-limiting example, the given client computing platform 104 mayinclude one or more of a desktop computer, a laptop computer, a handheldcomputer, a tablet computing platform, a NetBook, a Smartphone, a gamingconsole, and/or other computing platforms.

External resource(s) 120 may include sources of information, externalentities participating with system 100, and/or other resources. In someimplementations, some or all of the functionality attributed herein toexternal resource(s) 120 may be provided by resources included in system100.

Server(s) 102 may include electronic storage 122, one or more processors124, and/or other components. Server(s) 102 may include communicationlines, or ports to enable the exchange of information with a networkand/or other computing platforms. Illustration of server(s) 102 in FIG.1 is not intended to be limiting. Server(s) 102 may include a pluralityof hardware, software, and/or firmware components operating together toprovide the functionality attributed herein to server(s) 102. Forexample, server(s) 102 may be implemented by a cloud of computingplatforms operating together as server(s) 102.

Electronic storage 122 may comprise non-transitory storage media thatelectronically stores information. The electronic storage media ofelectronic storage 122 may include one or both of system storage that isprovided integrally (i.e., substantially non-removable) with server(s)102 and/or removable storage that is removably connectable to server(s)102 via, for example, a port (e.g., a USB port, a firewire port, etc.)or a drive (e.g., a disk drive, etc.). Electronic storage 122 mayinclude one or more of optically readable storage media (e.g., opticaldisks, etc.), magnetically readable storage media (e.g., magnetic tape,magnetic hard drive, floppy drive, etc.), electrical charge-basedstorage media (e.g., EEPROM, RAM, etc.), solid-state storage media(e.g., flash drive, etc.), and/or other electronically readable storagemedia. Electronic storage 122 may include one or more virtual storageresources (e.g., cloud storage, a virtual private network, and/or othervirtual storage resources). Electronic storage 122 may store softwarealgorithms, information determined by processor(s) 124, informationreceived from server(s) 102, information received from client computingplatform(s) 104, and/or other information that enables server(s) 102 tofunction as described herein.

Processor(s) 124 may be configured to provide information processingcapabilities in server(s) 102. As such, processor(s) 124 may include oneor more of a digital processor, an analog processor, a digital circuitdesigned to process information, an analog circuit designed to processinformation, a state machine, and/or other mechanisms for electronicallyprocessing information. Although processor(s) 124 is shown in FIG. 1 asa single entity, this is for illustrative purposes only. In someimplementations, processor(s) 124 may include a plurality of processingunits. These processing units may be physically located within the samedevice, or processor(s) 124 may represent processing functionality of aplurality of devices operating in coordination. The processor(s) 124 maybe configured to execute modules 106, 108, 110, 112, 114, 116, 118,and/or other modules. Processor(s) 124 may be configured to executemodules 106, 108, 110, 112, 114, 116, 118, and/or other modules bysoftware; hardware; firmware; some combination of software, hardware,and/or firmware; and/or other mechanisms for configuring processingcapabilities on processor(s) 124. As used herein, the term “module” mayrefer to any component or set of components that perform thefunctionality attributed to the module. This may include one or morephysical processors during execution of processor readable instructions,the processor readable instructions, circuitry, hardware, storage media,or any other components.

It should be appreciated that although modules 106, 108, 110, 112, 114,116, and 118 are illustrated in FIG. 1 as being implemented within asingle processing unit, in implementations in which processor(s) 124includes multiple processing units, one or more of modules 106, 108,110, 112, 114, 116, and/or 118 may be implemented remotely from theother modules. The description of the functionality provided by thedifferent modules 106, 108, 110, 112, 114, 116, and/or 118 describedbelow is for illustrative purposes, and is not intended to be limiting,as any of modules 106, 108, 110, 112, 114, 116, and/or 118 may providemore or less functionality than is described. For example, one or moreof modules 106, 108, 110, 112, 114, 116, and/or 118 may be eliminated,and some or all of its functionality may be provided by other ones ofmodules 106, 108, 110, 112, 114, 116, and/or 118. As another example,processor(s) 124 may be configured to execute one or more additionalmodules that may perform some or all of the functionality attributedbelow to one of modules 106, 108, 110, 112, 114, 116, and/or 118.

FIG. 9 illustrates a method 900 for real estate risk transference via acontract by which conveys an economic right to a portion of futureappreciation of real estate property, in accordance with one or moreimplementations. The operations of method 900 presented below areintended to be illustrative. In some implementations, method 900 may beaccomplished with one or more additional operations not described,and/or without one or more of the operations discussed. Additionally,the order in which the operations of method 900 are illustrated in FIG.9 and described below is not intended to be limiting.

In some implementations, method 900 may be implemented in one or moreprocessing devices (e.g., a digital processor, an analog processor, adigital circuit designed to process information, an analog circuitdesigned to process information, a state machine, and/or othermechanisms for electronically processing information). The one or moreprocessing devices may include one or more devices executing some or allof the operations of method 900 in response to instructions storedelectronically on an electronic storage medium. The one or moreprocessing devices may include one or more devices configured throughhardware, firmware, and/or software to be specifically designed forexecution of one or more of the operations of method 900.

At an operation 902, a current cash settlement value of the contract maybe determined. The cash settlement value may be an amount due to theinvestor entity responsive to the contract being expired. Operation 902may be performed by one or more processors configured to execute acurrent-cash-settlement-valuation module that is the same as or similarto current-cash-settlement-valuation module 106, in accordance with oneor more implementations.

At an operation 904, future cash settlement values per period may bedetermined based on one or more of a term of the contract, anappreciation projection associated with the first real estate property,or a conditional prepayment rate vector. Operation 904 may be performedby one or more processors configured to execute aperiodic-cash-settlement-value-projection module that is the same as orsimilar to periodic-cash-settlement-value-projection module 108, inaccordance with one or more implementations.

At an operation 906, a projected home price index associated with thefirst real estate property may be determined based on one or more homeprice appreciation vectors. The projected home price index may describeappreciation of the first real estate property between a projection dateand a contract termination date. A given home price appreciation vectormay represent a forecast scenario of an outcome of appreciation of thefirst real estate property. Operation 906 may be performed by one ormore processors configured to execute aprojected-home-price-index-construction module that is the same as orsimilar to projected-home-price-index-construction module 110, inaccordance with one or more implementations.

At an operation 908, an early termination value of the contract may bedetermined. The early termination value may describe an amount due tothe investor entity in the event that the contract is terminated duringan early termination period set forth in the contract. The earlytermination value may be the greater of a participation share ofappreciation or an early termination amount set forth in the contract.Operation 908 may be performed by one or more processors configured toexecute an early-termination-value-determination module that is the sameas or similar to early-termination-value-determination module 112, inaccordance with one or more implementations.

At an operation 910, conditional prepayment rate vectors associated withthe contract may be determined. A given conditional prepayment ratevector may represent a prepayment scenario based on a statisticallikelihood the contract will terminate within a given period. Operation910 may be performed by one or more processors configured to execute aconditional-prepayment-rate-vector-determination module that is the sameas or similar to conditional-prepayment-rate-vector-determination module114, in accordance with one or more implementations.

At an operation 912, a value of the contract may be determined based oncash flow associated with the contract. The value may be determined bysumming discounted projected cash flows for future periods. A givenprojected cash flow for a given period may be the greater of the sharedhome price appreciation and the early termination value, multiplied bythe conditional prepayment rate, where the shared home priceappreciation equals period home price index divided by the starting homeprice index multiplied by the initial home value. Operation 912 may beperformed by one or more processors configured to execute aprojected-cash-flow-contract-valuation module that is the same as orsimilar to projected-cash-flow-contract-valuation module 116, inaccordance with one or more implementations.

At an operation 914, a probability of expiry per period may bedetermined. A given probability of expiry for a corresponding period maybe based on a probability of a transfer of title of the first realestate property during the corresponding period. Transfer of title maybe effected by either a sale by the owner entity of the first realestate property or death of the owner entity. Operation 914 may beperformed by one or more processors configured to execute astochastic-PDE-contract-valuation module that is the same as or similarto stochastic-PDE-contract-valuation module 118, in accordance with oneor more implementations.

At an operation 916, a present value of the contract may be determinedusing a probabilistic model based on the future cash settlement valuesfor periodic expires, and the probabilities of expiry for correspondingperiods. Operation 916 may be performed by one or more processorsconfigured to execute a stochastic-PDE-contract-valuation module that isthe same as or similar to stochastic-PDE-contract-valuation module 118,in accordance with one or more implementations.

Although the present technology has been described in detail for thepurpose of illustration based on what is currently considered to be themost practical and preferred implementations, it is to be understoodthat such detail is solely for that purpose and that the technology isnot limited to the disclosed implementations, but, on the contrary, isintended to cover modifications and equivalent arrangements that arewithin the spirit and scope of the appended claims. For example, it isto be understood that the present technology contemplates that, to theextent possible, one or more features of any implementation can becombined with one or more features of any other implementation.

1-30. (canceled)
 31. A system configured for real estate risktransference via a contract associated with a first real estateproperty, the contract being an asset-backed index swap or an investmentcontract in which an owner entity of the first real estate propertygrants to an investor entity an economic right to a portion of futureappreciation of the first real estate property in exchange forconsideration, the contract expiring responsive to a transfer of titleof the first real estate property, the system comprising: a plurality ofprocessors, comprising: a first processor configured to executecomputer-readable instructions to determine future cash settlementvalues of expiry per period for a plurality of periods based oninformation received by the first processor, the received informationincluding one or more of a term of the contract, an appreciationprojection associated with the first real estate property, or aconditional prepayment rate vector; a second processor configured toexecute computer-readable instructions to determine a probability ofexpiry per period for the plurality of periods, a given probability ofexpiry for a corresponding period being based on a probability of atransfer of title of the first real estate property during thecorresponding period, transfer of title being effected by either a saleby the owner entity of the first real estate property or death of theowner entity; and a third processor configured to executecomputer-readable instructions to determine a present value of thecontract using a probabilistic model based on the future cash settlementvalues for periodic expires received from the first processor, and theprobabilities of expiry for corresponding periods received from thesecond processor, wherein the present value of the contract is outputtedby the third processor to one or more client computing platforms,enabling an investor entity to access the present value of the contractvia a client computing platform for use by the investor entity as abasis for the consideration to obtain the economic right to the portionof future appreciation of the first real estate property; and whereinthe plurality of processors is configured to provide parallel andcoordinated processing.
 32. The system of claim 31, wherein the systemis connected to the one or more client computing platforms via anetwork.
 33. The system of claim 31, wherein the plurality of processorsfurther comprises a fourth processor configured to executecomputer-readable instructions to determine a current cash settlementvalue of the contract, the cash settlement value being an amount due tothe investor entity responsive to the contract being expired.
 34. Thesystem of claim 33, wherein the cash settlement value is equal to thegreater of a shared index appreciation and an early termination value.35. The system of claim 34, wherein the shared index appreciation is acontractual appreciation share multiplied by a change in a designatedindex multiplied by an initial value of the first real estate property,the appreciation share being an amount of future appreciation conveyedby the contract, the designated index being an index that measuresprices of residential housing, the initial value being the value of thefirst real estate property when the contract is initially placed intoforce.
 36. The system of claim 34, wherein the early termination valueis determined based on an early termination provision, the earlytermination provision designating either a set schedule or an accretionmodel with a base amount plus an annual rate of return for a duration ofan early termination period and wherein, under the set schedule, theearly termination value is determined from a table via a look-up basedon an age of the contract.
 37. The system of claim 36, wherein the baseamount is a total contract cost to an investor associated with thecontract.
 38. The system of claim 31, wherein the cash settlement valuefor each projected period is the greater of a shared index appreciationor an early termination value, the shared index appreciation is acontractual appreciation share, the early termination value being anamount owed to the investor entity responsive to the contract expiringduring an early termination period stipulated in the contracts.
 39. Thesystem of claim 31, wherein the plurality of processors furthercomprises a fifth processor configured to execute computer-readableinstructions to determine a projected home price index associated withthe first real estate property based on one or more home priceappreciation vectors, the projected home price index describingappreciation of the first real estate property between a projection dateand a contract termination date, a given home price appreciation vectorrepresenting a forecast scenario of an outcome of appreciation of thefirst real estate property.
 40. The system of claim 39, wherein astarting point of the projected home price index is equal to a currentdesignated index value divided by a contact starting index multiplied byone hundred.
 41. The system of claim 39, wherein the outcome resultingin an early termination of the contract is one of an expected outcome, astressed outcome, and a situational outcome.
 42. The system of claim 39,wherein the given home price appreciation vector accounts for one ormore of historical index performance, macro-economic factors, and localmarket demographics.
 43. The system of claim 39, wherein the given homeprice appreciation vector includes one or more of a linear function, aparabolic function, a polynomial function, a sinusoidal function, and astochastic function.
 44. The system of claim 31, wherein the pluralityof processors further comprises a sixth processor configured to executecomputer-readable instructions to determine an early termination valueof the contract, the early termination value being an amount due to theinvestor entity in the event that the contract is terminated during anearly termination period set forth in the contract, the earlytermination value being the greater of a participation share ofappreciation or an early termination amount set forth in the contract.45. The system of claim 31, wherein the plurality of processors furthercomprises a seventh processor configured to execute computer-readableinstructions to determine conditional prepayment rate vectors associatedwith the contract, a given conditional prepayment rate vectorrepresenting a prepayment scenario based on a statistical likelihood thecontract will terminate within a given period.
 46. The system of claim45, wherein the given conditional prepayment rate vector is determinedbased on one or more of demographic information associated with theowner entity, home price index performance, a proximity to contractorigination, an early termination provision, or model stressing.
 47. Thesystem of claim 45, wherein the given conditional prepayment rate vectoris dynamic and changes over time.
 48. The system of claim 31, whereinthe plurality of processors further comprises an eighth processorconfigured to execute computer-readable instructions to determine avalue of the contract based on cash flow associated with the contract bysumming discounted projected cash flows for future periods, a givenprojected cash flow for a given period being the greater of a sharedhome price appreciation and an early termination value, multiplied bythe conditional prepayment rate vector, wherein the shared home priceappreciation equals period home price index divided by a starting homeprice index multiplied by an initial home value.
 49. The system of claim48, wherein the given projected cash flow for the given period isdiscounted by a target return to arrive at a present value.
 50. Thesystem of claim 31, wherein the probabilistic model is a modifiedBlack-Scholes model, the modified Black-Scholes model being aBlack-Scholes model that is modified by (1) synthetically replicatingthe contract with commonplace contracts puts and calls, (2) solving fora value of the commonplace contracts puts and calls across all possiblemonthly expires, and (3) multiplying the value of the commonplacecontracts puts and calls by the conditional prepayment rate vector or aprobability of expiry in individual periods.